Community Health Systems 2015 Annual Report Download - page 31

• payment of services which require few, if any, substantive duties by the physician, or payment for services
in excess of the fair market value of the services rendered,
• coverage on the hospital’s group health insurance plans at an inappropriately low cost to the physician,
• purchasing goods or services from physicians at prices in excess of their fair market value,
• rental of space in physician offices, at other than fair market value, or
• physician-owned entities (often referred to as physician-owned distributorships, or PODS) that derive
revenue from selling, or arranging for the sale of, implantable medical devices ordered by their physician-
owners for use on procedures that physician-owners perform on their own patients at hospitals or ASCs.
We have a variety of financial relationships with physicians who refer patients to our hospitals. Physicians
own interests in a number of our facilities. Physicians may also own our stock. We also have contracts with
physicians providing for a variety of financial arrangements, including employment contracts, leases,
management agreements and professional service agreements. We provide financial incentives to recruit
physicians to relocate to communities served by our hospitals. These incentives include relocation,
reimbursement for certain direct expenses, income guarantees and, in some cases, loans. Although we strive to
comply with the anti-kickback statute, taking into account available guidance including the “safe harbor”
regulations, we cannot assure you that regulatory authorities will not determine otherwise. If that happens, we
could be subject to criminal and civil penalties and/or exclusion from participating in Medicare, Medicaid, or
other government healthcare programs.
The Social Security Act also includes a provision commonly known as the “Stark Law.” This law prohibits
physicians from referring Medicare and Medicaid patients to healthcare entities in which they or any of their
immediate family members have ownership interests or other financial arrangements. These types of referrals are
commonly known as “self referrals.” There are ownership and compensation arrangement exceptions to the self-
referral prohibition. One exception, known as the “whole hospital” exception, allows a physician to make a
referral to a hospital if the physician owns an interest in the entire hospital, as opposed to an ownership interest in
a department of the hospital. Another exception allows a physician to refer patients to a healthcare entity in
which the physician has an ownership interest if the entity is located in a rural area, as defined in the statute.
There are also exceptions for many of the customary financial arrangements between physicians and providers,
including employment contracts, leases and recruitment agreements. From time to time, the federal government
has issued regulations which interpret the provisions included in the Stark Law.
The Reform Legislation narrowed the “whole hospital” exception to the Stark Law. The Reform Legislation
permitted existing physician investments in a whole hospital to continue under a “grandfather” clause if the
arrangement satisfies certain requirements and restrictions, but physicians are prohibited, from the time the
Reform Legislation became effective, from increasing the aggregate percentage of their ownership in the
hospital. The Reform Legislation also restricts the ability of existing physician-owned hospitals to expand the
capacity of their aggregate licensed beds, operating rooms and procedure rooms. The whole hospital exception
also contains additional public disclosure requirements.
Sanctions for violating the Stark Law include denial of payment, civil monetary penalties of up to $15,000 per
claim submitted and exclusion from federal healthcare programs. The statute also provides for a penalty of up to
$100,000 for a scheme intended to circumvent the Stark Law prohibitions.
In addition to the restrictions and disclosure requirements applicable to physician-owned hospitals under the
Stark Law, CMS regulations require physician-owned hospitals and their physician owners to disclose certain
ownership information to patients. Physician-owned hospitals must disclose their physician ownership in writing
to patients and must make a list of their physician owners available upon request. Additionally, each physician
owner who is a member of a physician-owned hospital’s medical staff must agree, as a condition of continued
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